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Bernanke and BoA: Read the Accusation
The Republicans seem intent on arguing that Federal Reserve Board Chairman Ben Bernanke threatened to remove Bank of America CEO Ken Lewis, if BoA backed out of its agreement to buy Merrill Lynch. Mr. Bernanke denied the accusation.
It might have helped matters if someone had bothered to read the evidence. The Post reports part of e-mail from Jeffrey Lacker, president of the Federal Reserve Bank of Richmond: "Just had a long talk with Ben. .... Also intends to make it even more clear that if they play that card [backing out of the purchase agreement on Merrill Lynch] and they need assistance, management is gone."
Note the "and they need assistance" part of the e-mail. Is this a threat to remove Ken Lewis? It looks like a statement from Bernanke that if BoA does not cooperate in carrying through on its agreement, then Bernanke will not help him in the future if he needs it.
That seems a bit far from a threat to remove Lewis. It is simply a statement that if Lewis doesn't cooperate with the Fed, then Bernanke will not come to his assistance if he needs it.
Given the large list of questionable actions in the various bailouts, this one doesn't seem to be worth a lot of time.
--Dean Baker
COMMENTS (10)
Is this some sort of warning shot against Bernanke because he has supposedly come out in favor of letting the Bush tax cuts expire in order to raise some much needed revenue?
Posted by: Brian J | June 26, 2009 8:31 AM
It sounds to me like he may be saying, "If you pass on the proposal, but you then fail, we'll replace the management." I don't see the original suggestion ("do this or I fire you") in the text, but I also don't see the other one, ("do this or we'll let you fail"). Of course, we know they would never let BOA fail.
Posted by: MrDuncan | June 26, 2009 8:58 AM
Surprise, surprise the Republicans are disingenuous and dishonest.
The relevant timeline is Bear Stearns is collapsing so gets sold off to prevent a panic. Bernanke and Paulson lectured on moral hazard so they let Lehman Brothers fail.
Markets enter free fall, Bernanke and Paulson tell Congressional leaders that they need TARP money or the American and global economies will collapse, that there will be no economy come Monday.
Shellshocked they broker deal of Merrill Lynch and BoA to prevent another Lehman Brothers. I think Ken Lewis was caught in a tough position, but he has a huge salary so I don't feel bad for him.
Bush should be credited with appointing Paulson and Bernanke despite their faults and biases and mistakes. Could have been much worse.
Posted by: Peter K. | June 26, 2009 10:21 AM
Dean-
Isn't this a perfect setup to argue the case for reinstitution of Glass-Steagal?
The mix of public/private purpose in bank holding companies mirrors the situation with Fannie/Freddie, i.e. one entity trying to serve two masters.
One bank that can create money using public resources and at the same time bet in capital markets is bound to have dangerous conflicts.
Posted by: ron | June 26, 2009 10:57 AM
Not only is it an obvious threat, it is a STRONG threat.
Further, this one email is just the tip of the iceberg. I expect multiple indictments incl. Lewis, Paulson, Bernanke. DB - if you are inclined to 'defend' these guys for some strange reason, you may want pay attention to direction & speed of that bandwagon... you'll be jumping off soon.
Posted by: mpower | June 26, 2009 4:11 PM
Sounds like a threat to me. (I'm a Dem and can't stand banks of any kind.)
Posted by: CDW | June 28, 2009 1:16 PM
Paulson and Bernanke threatened to fire the managers of BofA if they did not acquire Merrill Lynch. But don't take some newspaper's word for it - talk to the NY State Attorney General: http://www.oag.state.ny.us/media_center/2009/apr/apr23a_09.html
The REAL accusation is completely laid out in the executive summary and exhibits at that website. Oh, and by the way, even if all you read is the little soundbite they gave you in this article, if saying to you that "management is gone" is not a threat, then maybe saying to this reporter "if you don't investigate your stories, writers are gone" is also not a threat.
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